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The Budget 2025-26 primarily emphasizes credit facilities, revised classification, and targeted support for first-time entrepreneurs. While these initiatives are commendable, the MSME sector requires attention on several other fronts to build a robust industrial base. Like agriculture, MSMEs form the backbone of the economy, with a high employment potential. The sector accounts for 45% of India’s exports, employing 7.5 crore people across more than one crore registered MSMEs and contributing 36% to manufacturing output.

Key Budget 2025-26 Allocations for MSMEs

1. Expanded Definition of MSMEs

The Budget has redefined MSMEs to allow enterprises to expand while still qualifying for government support. The revised investment and turnover limits are as follows: uMicro Enterprises: Investment threshold raised from Rs.1 crore to Rs.2.5 crore, and turnover limit increased from Rs.5 crore to Rs.10 crore. uSmall Enterprises: Investment limit increased from

Rs.10 crore to Rs.25 crore, and turnover threshold raised from Rs.50 crore to Rs.100 crore. uMedium Enterprises: Investment cap extended from Rs.50 crore to Rs.125 crore, with the turnover limit increased from Rs.250 crore to Rs.500 crore.

2. Enhanced Credit Facilities

MSMEs will receive financial support through capital subsidies for technology upgrades and access to cheaper credit under the Credit Guarantee Scheme. They can also benefit from marketing assistance, market development aid, and reimbursement for ISO certification expenses.

3. Increased Credit Guarantee Cover

Recognizing MSMEs as a priority sector, the government

has raised the credit guarantee cover from Rs.5 crore to Rs.10 crore. This move is expected to generate an additional Rs.1.5 crore in credit over the next five years. Export-oriented MSMEs will also benefit, with term loans up to ` 20 crore now covered under the scheme.

4. Support for Labor-Intensive Sectors

Special schemes have been announced for sectors such as leather, footwear, toys, and food processing. The Finance Minister highlighted that these initiatives could create 22 lakh jobs, generate Rs.4 lakh crore in turnover, and drive exports worth Rs.1.1 lakh crore.

5. Import and Export Incentives

The Budget introduces duty exemptions on wet blue leather, a semi-processed raw material used in domestic processing, and removes export duties on crust leather. These measures aim to support small-scale tanners and boost exports.

6. Development of Toy Manufacturing

The government plans to position India as a global hub for toy production through the National Action Plan for Toys, focusing on cluster development, skill enhancement, and a strengthened manufacturing ecosystem.

7. Boost to Food Processing in Eastern India

A new Makhana Board will be established in Bihar with an allocation of ` 2,250 crore. Additionally, the National Export Mission will set targets for various industries to promote sectoral growth.

8. Attracting Foreign Direct Investment (FDI)

To make India a more attractive investment destination, the Budget introduces an improved Better Investment Treaty (BIT), designed to offer a more investor-friendly environment.

Key Considerations and Challenges

A decade after the launch of the ‘Make in India’ program, its core objectives—enhancing the manufacturing sector’s GDP share, employment, and industrial output—have seen limited progress. While the Budget’s initiatives may strengthen the manufacturing ecosystem, global trade restrictions pose a significant challenge. However, India’s vast domestic market remains a crucial advantage.

For this potential to be realized, a robust consumer base with sufficient disposable income is essential. The government must adopt a mid-term policy that supports holistic development. While a single Budget cannot achieve this, economic experts emphasize the need for mass income generation. India’s industrial landscape consists of 6,000 large units, six lakh medium and small units, and six crore micro enterprises. Given that micro units employ an average of just 1.7 people, their growth is essential for national industrial progress.

The real question remains—how long will policymakers take to recognize and act upon this fundamental yet critical truth?